Forecasting Germany GDP Data

We have taken quarterly data of Germany’s GDP, from 1994Q1 to 2020Q3.

GDP Quarterly Data Germany

Germany
750,000

700,000

650,000

600,000

550,000

500,000
10 20 30 40 50 60 70 80 90 100 110

Log of Germany’s GDP Quarterly Data

LNGERMANY
13.6

13.5

13.4

13.3

13.2

13.1
10 20 30 40 50 60 70 80 90 100 110

As we can see from graph of Log of Germany GDP’s Quarterly data, that series is non-stationary, so
we will check stationarity at first difference.

DLnGermnay

DLNGERMNAY
.12

.08

.04

.00

-.04

-.08

-.12
10 20 30 40 50 60 70 80 90 100 110
At first difference, series seems to have a constant mean, and now can be processed for checking AR
and MA processes.

So, we take correlogram of first difference of log prices of Germany’s GDP as “dlngermnay”

Correlogram- “dlngermnay”

We can see from Correlogram that ACF and PACF are significant only for 1 levels only, so we must
check ARMA levels for those ARIMA (p,d,q) models:-(0,1,1), (1,1,0),(1,1,1)
ARMA Check at (0,1,1) levels

ARMA Check at (1,1,0) levels

ARMA Check at (1,1,1) levels

 ARIMA (0,1,1) (1,1,0) (1,1,1)
Adj R-Square 0.034762 0.037647 0.014032
AIC -5.594465 -5.591249 -5.564655
SBIC -5.545704 -5.544302 -5.470733

As we find that AIC is highest for ARIMA(1,1,1) model we will prefer ARIMA (1,1,1) model for further
forecasts and analysis.

Correlogram of Residuals at ARIMA (1,1,1)

As we can see, no residual has significant ACF and PACF, so we can say that the ARIMA(1,1,1) model
is best fit for predicting future values.

Now we look for coefficients of AR(1), MA(1) and Constant using Conditional Least Squares
Forecast using E-Views

We have taken data till 2017Q4 as sample and used Forecast function on ARIMA(1,1,1) model to
predict remaining 8 quarters of data and the above picture shows E-Vies Forecast result.

Time Germany GDP Forecst

2018-Q4 742893.2 748018.5
2019-Q1 747441.4 750605.8
2019-Q2 743677.3 753197.1
2019-Q3 745977.6 755795
 2019-Q4 745838.2 758401
2020-Q1 731688.2 761015.4
2020-Q2 660031.9 763638.7
2020-Q3 716004.6 766270.9

Forecast for 2020Q4

Y2020-q4= 716004+ exp(0.003176+ 0.052052*(-0.973081)+0.756392*13.48144)

= 741590 Million USD